The Nastase Cabinet is not going to break free of the stand-by agreement any time soon. Updated and extended until August 2003 due to repeated delays, the programme needs one more memorandum to set new goals for the first half of this year.
"We are already working on a new additional memorandum of understanding to include performance targets that have to be attained by June 30, 2003," a Finance Ministry official told Ziarul Financiar.
Neven Mates, IMF's Negotiator for Romania is due to arrive in Bucharest on Monday to provide the authorities with new assignments on the structural reform and privatisation chapters, the execution of which is behind schedule.
Despite the optimism of Romanian officials, the evolution of the agreement has many "ifs" unanswered. If the memorandum is completed during IMF's next visit, the document might be discussed by the Fund's Board by late March - early April. The endorsement of the IMF Directors conditions the release of the fourth instalment of the stand-by agreement worth some $75.3 million. The completion of the goals set by June 30 is supposed to be assessed by a new IMF mission in July. If the result of the assessment is positive, it will be analysed by the Board in August, when Romania could get the last two tranches of the loan.
The IMF wants the Nastase Cabinet to promise in the new memo of understanding that it will begin privatising Banca Comerciala Romana (Romanian Commercial Bank - BCR) by selling up to 25% to the European Bank for Reconstruction and Development (EBRD) and to the International Finance Corporation, the World Bank's investment arm. The Fund agrees the international market is not kind to the privatisation of a bank the size of BCR at this moment, but wants the supplementary memorandum of understanding to include new concrete deadlines for the privatisation process.
The agenda of the negotiations to begin next week also includes the old unresolved issues carried over from one memorandum to another: the collection of thermal power bills, restructuring and privatising companies such as Siderurgica Hunedoara and Tractorul Brasov, cutting off the debtors of the utility suppliers, restructuring and privatisating the energy sector.
The structural reform, which should lead to increasing the weight of the private sector in Romania's gross domestic product, is yet another chapter where the Government has to renew commitments.
A team of Fund experts on Tuesday began talks in order to assess the fulfilment of last fall's commitments. The first call was paid to the Privatisation Authority, where they inquired about the steps taken to ensure the financial discipline of the companies currently preparing for privatisation. The reforms specified in the agreement signed in October 2001 and set to take up 18 months were conducted so slowly that Romania got the right to borrow only three instalments of the $380 million set aside by the IMF. The first tranche was drawn when the agreement was signed, while the last two were drawn together in September 2002.
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